Contractor Loan Fund

Chris Reichert, CEO of Stifel Bank & Trust, announced the $10-million Contractor Loan Fund to help minority and women contractors get access to capital on May 27 at the Cortex Innovation Community in Midtown St. Louis. To his left is Floyd Simms of Simms Building Group, Adolphus Pruitt of the NAACP and Scott Wilson of S.M. Wilson construction company.

When Floyd Simms founded his contracting business in 2003, he took his life’s savings and “bet it all on Simms,” he said.

Like many minority contractors, he didn’t have the collateral or cash flow that banks require to get a traditional loan. His business has grown “slow and steady,” and now Simms Building Group is the general contractor on an $8 million streetscape contract within the $2.2 billion Cortex research park project in Midtown St. Louis.

On May 27 at the Cortex Innovation Community building, Simms was among some 50 business and city leaders who applauded the announcement of the $10-million Contractor Loan Fund, which is designed to give minority and women contractors access to capital so they can grow their businesses.

“Having the shot at another arm of capital, that makes us able to take the leap,” Simms said of minority contractors. “We have the talent. We have the knowledge and expertise. We just need resources.”

The loan fund will offer construction-related loans of up to $1 million with “relaxed qualifying criteria.” The goal is to increase the number, size and stability of minority and women-owned construction companies in the region, said fund chairman Chris Reichert, CEO of Stifel Bank & Trust.

“There’s over $10 billion in significant projects on the slate over the next 10 to 15 years,” Reichert said. “We expect for those projects to be performed by an increasing number of minority-owned construction contractors. It requires that all of these contractors graduate to traditional banking relationships.”

According to a recent disparity study, the City of St. Louis failed to employ a fair amount of minority- and women-owned businesses when awarding city contracts for construction jobs from 2007 to 2012. The firm Mason Tillman Associates, who conducted the study, specifically found a disparity in how the city awards construction contracts to African-American businesses, both as prime contractors and subcontractors.

As the firm noted, part of the problem is that these contractors do not have access to capital – and the city should work towards breaking down these barriers.

Adolphus Pruitt, president of the St. Louis City NAACP, said the idea for the fund was originally part of the Community Benefits Agreement that the contracting community drew up with the Metropolitan Sewer District (MSD) a few years ago. Because MSD is obligated to complete $4.7 billion in sewer improvements over the next 20 years, the agreement ensures that minorities and women will be included in that work.

Later, Reichert approached Pruitt and told him that Dennis Lower, Cortex president and CEO, was also trying to implement a similar fund. They all joined forces, and now 30 entities have partnered to make the fund a reality, including Washington University, Saint Louis University and the City of St. Louis.

“This is a big deal,” Pruitt said. “Cash flow is like oxygen for a business. Without it, it would die.”

Pruitt said the St. Louis Development Corporation (SLDC) sent out letters to push the fund along. Reichert said 90 percent of the $10.7 million came from the private sector, and less than 10 percent from public organizations. The partnering banks – Stifel, Eagle Bank and Trust, Enterprise Bank & Trust, Midland States Bank and Scottrade Bank – raised about 70 percent of the fund.

At the press conference on May 27, Scott Wilson, of S.M. Wilson construction company, spoke as one of the leaders of the fund. Wilson noted that “way back,” state Senator Jamilah Nasheed led a protest against his company for not employing minorities on his job sites.

“Twenty years ago, I might have felt differently about minority inclusion on construction projects,” he said of Nasheed’s protest. “I was just trying to run a business.” Wilson told the audience that minority inclusion is now one of the most important topics discussed in the construction industry.

By the numbers 

S.M. Wilson is the general contractor on several projects within the Cortex research park. However, his inclusion efforts on those projects fall short of the city’s requirements.

Because Cortex research park receives tax incentives from the city, general contractors leading these projects are required to comply with the city ordinance on workforce inclusion – which states 25 percent of labor hours are to be performed by minorities; 5 percent of labor hours are to be performed by women; 20 percent of labor hours are to be performed by city residents; and 15 percent of all hours are to be performed by apprentices enrolled in an approved training program.

So far, two of S.M. Wilson’s projects within Cortex have failed to meet this “boots on the ground” requirement, according to a February 2015 report produced by the city agency SLATE. Within Cortex, the company also falls well below the workforce inclusion met by his fellow general contractors, Tarlton and Simms. On the Shriners Hospital completed in December 2014, S.M. Wilson employed 18 percent minorities, 7.5 percent apprentices, 2.8 percent women and 7.7 percent local residents.

The workforce numbers on S.M. Wilson’s IKEA project are also similarly low – while Simms employed 34 percent minority, 14 percent apprentice, 6.6 percent women and 23.5 percent local resident workers on his streetscape project.

And on the Cortex BioGenerator completed in 2013, Tarlton Corporation (a woman-owned business) also exceeded the city ordinance by employing 33 percent minority workers.

Enforcing compliance 

Enforcing compliance is another issue that the disparity study raised. According to Otis Williams of SLDC, the city is working on creating punitive measures for companies that do not meet the city’s inclusion requirements.

At the end of the press conference, state Rep. Courtney Curtis – a black Democrat representing part of North St. Louis County – asked how the fund’s success will be measured.

Curtis has been fighting legislative actions that make it harder for minorities to get in the construction game – namely legislation that passed in St. Louis County and was recently proposed in the city that require bidders on government contracts of $25,000 or more to maintain or participate in a Department of Labor-approved apprentice program. Union contractors are often the only ones that meet that requirement, making city contracts “anti-competitive for minority contractors,” he said. And those apprentice programs also have low minority participation, he said.

“It’s not just the money,” Curtis said. “It’s making sure that other legislative items don’t keep them out. That’s why I specifically asked the question, ‘What would this fund do to help us meet and exceed the goals in the region?’”

Building capital for MBEs

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